[Editorial] Income Distribution Differential Widened

The Korea Institute of Public Finance (KIPF) presented the worrisome prospect in `the meeting to set up the measures nurturing the middle class and improving the general peoples` living condition` that the nation`s income differential has enlarged and the gap will be widened more in the future.

The KIPF analyzed that the income differential structure will change to the form of the advanced countries due to the rapid development of the information technology (IT) industry and the continuous expansion of the piecework system. Could this be true? If the analysis by the KIPF were right, we would not need to worry. It is because that the development of the IT industry and the piecework system will contribute to bring up our society`s potential and will indirectly improve the welfare for the lower income class.

But according to the last month`s data released by the National Statistical Office (NSO), the income distribution differential has aggravated this year when the IT boom cooled down rather than last year, and the Gini coefficient representing the extent of the income disparity was better last year than this year. Consequently, the expansion of the IT workers` incomes has had little impact on the aggravation of the income differential, and the NSO`s analysis shows that there would be even worse condition than presented in the KIPF`s analysis.

In that sense, the diagnosis of the experts outside the government seems to be more convincing that the expansion of the income differential derived from the worsened employment situation. This analysis can be backed by the recent report that, when the economically inactive population increased due to the lack of available jobs, the illusory phenomenon could appear in which the unemployment rate declines. This proves the failure of the government`s productive welfare policy to nurture the productive ability and to create the new jobs.

The government should establish the countermeasures on assumption of such a circumstance. While the KIPF suggested the improvement of the taxation system such as the expansion of the range of financial income to impose the consolidated taxation, in order to reduce the income differential, it is the government who has continuously reduced the range to impose the consolidated taxation and the government has always justified its action with some kind of pretext. I am anxious to know whether such pretexts have been terminated.

It is an ex post facto and passive measure to increase the benefits for the lower income class by extracting the fortune from the higher income class via the revision of taxation system. The most reliable and positive measure is to create new jobs, and this is the shortcut to the productive welfare that the government has maintained.

A lot of plausible measures have came out as usual in the Cheong Wa Dae meeting. I hope that the government`s action would not become the ephemeral pork-barreling. It is because that if the income differential keeps broadening in the situation in which the social safety net is not properly established, the dangerous situation may be forecasted.